Bilbo Baggins wants to save money to meet three objectives. First, he would like to be able to retire 30 years from now with a retirement income of $23,000 per month for 20 years, with the first payment received 30 years and 1 month from now. Second, he would like to purchase a cabin in Rivendell in 10 years at an estimated cost of $320,000. Third, after he passes on at the end of the 20 years of withdrawals, he would like to leave an inheritance of $1,000,000 to his nephew Frodo. He can afford to save $2,100 per month for the next 10 years. If he can earn an 11 percent EAR before he retires and an 8 percent EAR after he retires, how much will he have to save each month in Years 11 through 30?

Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
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Bilbo Baggins wants to save money to meet three
objectives. First, he would like to be able to retire 30 years from now with a retirement
income of $23,000 per month for 20 years, with the first payment received 30 years
and 1 month from now. Second, he would like to purchase a cabin in Rivendell in
10 years at an estimated cost of $320,000. Third, after he passes on at the end of the
20 years of withdrawals, he would like to leave an inheritance of $1,000,000 to his
nephew Frodo. He can afford to save $2,100 per month for the next 10 years. If he
can earn an 11 percent EAR before he retires and an 8 percent EAR after he retires,
how much will he have to save each month in Years 11 through 30?

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